Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

China's second largest mobile operator China Unicom (CHU - Analyst Report) added 3.34 million subscribers in October, up 1.77% from the prior month. This takes the company’s total customer base to 192.38 million.

The company’s GSM subscriber base expanded to 159.23 million with the net addition of 0.42 million customers, while its 3G subscriber base increased to 33.15 million with the net addition of 2.92 million. This is the third consecutive month that China Unicom added more than 2 million 3G users.

China Unicom’s 3G business is growing rapidly, and surpassed its target of expanding the 3G user base beyond 25 million by the year-end. The rapid growth has been particularly driven by Apple Inc.’s (AAPL - Analyst Report) iPhone sales. China Unicom enjoys the exclusive right to distribute iPhone in China since October 2009. The addition of Apple’s iPad tablet, talks for which are ongoing, would further draw 3G subscribers, eventually leading to higher average revenue per user.

Nevertheless, intense competition in the domestic wireless market, in particular from China Mobile (CHL - Snapshot Report) and China Telecom Corp. (CHA - Snapshot Report), and high levels of marketing and promotional expenditures related to 3G service deployments are restricting its future growth.

Coming to the fixed-line business, the company is poised to benefit from the stabilization and expansion of fiber optic service in its broadband business. China Unicom added 0.512 million broadband customers in October bringing the total number to 55.05 million. But the company is experiencing significant declines in its local access lines due to the impact of the ongoing fixed-to-mobile substitution. Erosion in the fixed-line subscriber base continues with approximately 0.278 million customers lost in October, taking the total number to 94.3 million.

Consequently, 3G and fixed-line broadband businesses are expected to remain under pressure due to increasing depreciation and amortization expenses, network, operations and support expenses, as well as selling expenses for the remainder of the year. We believe these expenses will have an adverse effect on the company’s future profitability, free cash flow and margins.

Despite the strength in 3G user growth, we have a long-term Underperform rating on China Unicom. The stock retains a Zacks #5 Rank (Strong Sell rating) for the short term (1–3 months).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
LAKE SHORE G LSG 0.77 +6.05%
QUESTCOR PHA QCOR 80.07 +2.47%
VIPSHOP HOLD VIPS 156.35 +1.82%
ENLINK MIDST ENLC 36.29 +1.60%
BNC BANCORP BNCN 17.33 +1.58%